U.S. Black Friday sales cost Canada $5 billion

Discounts, higher duty-free limits and a robust Canadian dollar spell trouble for retailers north of the border.

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By Ari Altstedter

capecodtimes.com

By Ari Altstedter

Posted Nov. 24, 2012 at 2:00 AM

By Ari Altstedter
Posted Nov. 24, 2012 at 2:00 AM

» Social News

TORONTO — Niyousha Kerr planned to drive two hours to Buffalo, N.Y., from Toronto for Black Friday shopping at U.S. stores that will help drain $5.01 billion from Canadian retailers this holiday season.

"Things are always cheaper and then on top of that there are sales," said Kerr, shopping at Toronto's Eaton Centre mall. Kerr plans to get her Christmas gifts south of the border this weekend with her husband and two friends, shopping at stores including Target Corp. and Toys 'R' Us Inc.

While retailers like Hudson's Bay Co., Canada's oldest company, are advertising Black Friday deals of their own, higher duty-free limits, lower U.S. prices and a currency near par with the U.S. dollar will lead to at least a 25 percent increase in lost sales abroad in November and December, said Douglas Porter, deputy chief economist at the Bank of Montreal. He says the sales drain will total $5 billion Canadian.

The government in June raised the amount Canadians can spend duty-free to C$200 from C$50 for trips longer than 24 hours and as much as C$800 for stays of more than 48 hours, giving shoppers more incentive to head south. Overnight trips to the United States rose 58 percent from 2001 to 2011, the latest year data is available from Statistics Canada.

"People are doing little shopping vacations in the U.S., even for a weekend," Porter said by phone from Toronto. "If you take a family of four down for a weekend the duty-free limit would be C$3,200. Obviously it depends on the family but I think that would pretty much fill the bill for the Christmas shopping season."

Black Friday, the day after U.S. Thanksgiving, is traditionally the beginning of the holiday shopping season in the United States when retailers lure customers with deep discounts. The name recalls a time when U.S. retailers would use the day to make a big part of their annual profit, and income statements would go to black from red.

Six percent of Canadians are planning a trip to the U.S. for Black Friday deals this year, according to a Harris-Decima survey of 1,004 people conducted Oct. 18 to 21 by the Retail Council of Canada, an industry group.

In Toronto, the country's largest city, 44 percent of shoppers said they were planning to buy gifts in the U.S. this holiday season, and 70 percent said U.S. retailers provide deeper discounts, according to a survey by Accenture, a Dublin-based consulting firm.

Canadian mall traffic will be reduced by people going south to shop, said Jeremy Reitman, chief executive officer of Reitmans Canada Ltd., a Montreal-based specialty clothing retailer. "That impedes the traffic to the malls and thereby the sales."